How An Investor makes Inⅴ estment decision First, identify his or her eficient frontier Estimate the expected returns and variances for all securities under consideration Estimate all the covariances among assets Determine the riskfree rate Determine the tangency portfolio Consequently, the eficient set is linearHow An Investor Makes Investment Decision • First, identify his or her efficient frontier – Estimate the expected returns and variances for all securities under consideration. – Estimate all the covariances among assets. – Determine the riskfree rate – Determine the tangency portfolio – Consequently, the efficient set is linear